‘Petroleum trade between India and Nepal gives positive message in every sense’ – The Himalayan Times – Nepal’s No.1 English Daily Newspaper

The Motihari-Amlekhgunj oil pipeline, South Asia’s first cross-border petroleum products pipeline, represents a milestone in regional cooperation and engineering achievement. Inaugurated by Indian Prime Minister Narendra Modi and Nepalese Prime Minister K.P. Sharma Oli on September 10, 2019, the 69-km pipeline connects Barauni in Bihar to Amlekhgunj in Nepal.

Completed in just 15 months, half the expected time, this ₹324 crore project spearheaded by Indian Oil Corporation Limited (IOCL) in collaboration with Nepal Oil Corporation Limited (NOC) delivers two million metric tonnes of affordable petroleum products annually. Beyond reducing costs and securing fuel supplies for Nepal, the project underscores India’s role as a vital regional development partner, leveraging geographic proximity and shared priorities to foster mutual growth.

The Himalayan Times had caught up with Managing Director of NOC Chandika Prasad Bhatta to discuss about the benefits of the pipeline and future cooperation between NOC and IOC. Excerpts:

How has the pipeline’s cost savings of ₹200 crore annually impacted Nepal’s economy and public services?

The construction of the pipeline helped us save two rupees cost per litre of petrol and we have reduced the price of the petrol for our consumers. When petroleum products are available at cheaper rates, it certainly helps increase productivity and consequently the whole economy of the country. When the cost of transport gets reduced, it helps reduce the price of goods. A reduced rate of petrol also positively contributes to the industrial products.

What economic ripple effects have resulted from the reduction of price by two rupees per litre for Nepali consumers?

It has direct effects on many sectors. Suppose if the petrol price is Rs 165 per litre, consumers would end up paying two rupees more or 167 rupees per litre. Industries are also saving their transportation cost and the ripple effect or the final impact of the reduced price can be seen in the market. Ultimately the citizens of the country get benefits from the reduced price. Reduced price can also help increase productivity which ultimately helps reduce price of commodities in the market. All these positive impacts help increase the numbers of industries which in turn create more employment opportunities in the country. When domestic industries increase production within the country, that also help import substitution efforts. This means the country does not have to spend much foreign currency to buy goods from other countries. If we can reduce the price of petroleum products either transportation cost or tax levied on petroleum products, it has many positive impacts on the country’s economy.

How has the pipeline improved Nepal’s energy security, especially during past disruptions like blockades?

In the past when we did not have Motihari-Amlekhgunj pipeline project, you must have seen many gas stations hanging signboard saying they had run out of petroleum products. Such a situation existed four- five years ago. People would drive their vehicles four-five kilometres to get fuel, but they had to return empty handed as gas stations would often run out of fuel.

Now the situation has changed. We have an adequate amount of petroleum products. We have ensured a smooth supply of petroleum products not only for common consumers but also for industries and we are in such a comfortable situation mainly because of Motihari-Amlekhgunj pipeline project. Now we can transport 20,000 litres of petroleum product in one fuel tanker. Earlier when we had to transport petroleum projects by road, our vehicles would take four to five days to transport petroleum products to different parts of the country, depending on the remoteness of the place. In the past we were not in a position to bring petroleum products on time even when there was a shortage in different parts of the country. Now we can bring 300,000 litre petrol. Therefore, we are in a very comfortable situation.

With fuel demand increasing by 90 per cent over five years, how will the expanded pipeline capacity meet this growth?

Our demand for petroleum products will increase in the coming days but it won’t be as high as 90 per cent. If you look at the data from last year, you will find an increase of two per cent consumption of petrol whereas this percentage for diesel is three per cent. The consumption of aviation fuel increased by 10-11 per cent. Due to the import of electric vehicles, the rate of consumption of petrol is less compared to the past. But the net consumption is certainly increasing. Pipelines will help us store petroleum products. We will be able to store 91,000 kilolitre (approximately nine crores and 10 lakh litres) petroleum products in Chitwan district. Similarly, we can store 19,000 kilolitres of petroleum product in Jhapa district and 28,000 kilolitres in Amlekhgunj. We have already signed an agreement with Indian Oil Corporation for the construction of these storage facilities and I hope that these facilities will be constructed very soon. It is going to be possible only because of the pipelines project. We were not in a position to bring this huge amount of petroleum projects through vehicles.

How has the pipeline reduced pilferage and adulteration, and what economic impact has this had?

In the past, we used to hear that drivers manipulating petroleum products. Since we have started importing petroleum products through pipeline, it has helped us reduce our loss. In the past, transportation of petroleum products would create traffic congestion and jams on the border. Roads suffered damage due to heavy vehicles and the government had to spend a lot of money to repair those roads. In the past, adulteration of petroleum products used to happen while petroleum products were being transported to destinations. As petroleum products are transported through pipelines, we are able to control pilferage and adulteration of petroleum products. Kerosine used to be mixed with diesel but now we have equalised the price of both kerosene and diesel.

We are thinking of bringing the pilferage and adulteration of petroleum products to zero by imposing a device that can track the vehicles transporting petroleum products from Amlekhgunj to other places, including Kathmandu.

How is the pipeline project strengthening India-Nepal economic ties and attracting further investment from India?

We have been doing fuel trade with India for more than 55-56 years. This is an exemplary cooperation that two government bodies have enjoyed for this long period on one product- fuel without any confusion or problems. This is a very positive thing and it is beneficial for both countries. IOC is an Indian government company. IOC does not have to do marketing in Nepal. They give us petroleum products at a price that gives a certain profit margin to them. We also keep some profit margin for ourselves before selling it to our consumers in the country. We have an automatic price system which means we maintain our price as fixed by Indian authorities. But we keep a certain profit margin with ourselves. Sometimes, when the witness a steep fuel price hike, we sell petroleum products at a subsidised rate, bearing the brunt of loss. At present we bear the loss of Rs 327 per gas cylinder purchased by the consumers. But we are able to make profits from petrol and aviation fuels. Therefore, the petroleum trade between India and Nepal gives a positive message in every sense- politically, economically and socially. This trade has played a great role in establishing cordial relations between the two countries.

What enabled the successful completion of this project in just 15 months, and what lessons does this offer for future cross-border projects?

We could do it soon because we worked hard. We have seen many projects suffering delays but, in this project, we could accomplish the task in just 15 months and we did so because local governments and local people provided all kinds of help to us. Every entity helped us whether it was the case of EIA, felling of trees or digging right of way (ROW). We repeatedly coordinated with the local bodies during the construction of the project. We did not have to face any obstruction from any side. This is the reason we could do it before the estimated time. The lesson that we learnt in this project will be implemented in other pipeline projects such as Amlekhgunj to Chitwan and Siliguri to Jhapa projects. Although we have 56 months to complete these projects, we would try to construct these pipelines in 36 months. We have advanced our bilateral talks with Indian authorities with the aim of completing these two projects within 36 months. We will start the construction works within a few months, immediately after the completion of DPR. In Amlekhgunj we did not have to pay much compensation because when the pipelines touched private property, we did drill to put the pipes much deeper.

How does the pipeline align with Nepal’s long-term energy and infrastructure goals?

Smooth supply of petroleum products helps build infrastructure. We do not have an electricity grid everywhere. Our electricity can meet only two per cent of energy needs. Petroleum products fulfil about 11 per cent of our energy needs. But when we do any projects in remote areas such as industrial, or hydro power, agriculture, irrigation or whatever, petroleum products have helped complete those projects in time. Petroleum products have been used as a raw material. Petrol and diesel have helped stakeholders to complete projects in remote areas where there is no electricity supply. Remote projects means construction of cable cars, exploration of mines, agriculture, infrastructure and hydropower projects. Petroleum projects thus greatly help in the overall economy of the country by helping stakeholders to complete projects in time and substitute imports.

What challenges did the project face, and how were they addressed through India-Nepal collaboration?

When we had to take the pipelines from under someone’s the private property, we had to spend some time to convince those people who were concerned about our drilling process. We told them that we will take pipelines from deep below their land and it won’t affect the productivity of their land plots because people had a misconception that if a pipeline goes through or near their land plots, it could explode. We told the local people not to worry. We told them that if there would be any fault, we will get the notice early in our control system and our experts will fix those problems immediately.

What technical know-how has IOCL transferred to NOC, and how has this enhanced local employment and capacity-building in Nepal?

This is the first pipeline project of the South Asia region itself. Before this project, we had only heard that petroleum products can be imported from pipes. We had doubts that we might end up suffering loss or accidents. When we built the pipeline, we saw that it was a safe method to import petroleum products and it is also a safe technology. Our people also learnt about the control, operation system, including technical systems. Skills have been transferred to our people.

How can the lessons learned from the successful implementation of this project pave the way for deeper, more meaningful collaborations in the future?

We have already built one project and we are bringing two more projects. Old experience is teaching us for the new projects. Now we have an easy environment to negotiate with Indian authorities. We had already conducted a government to government agreement one year ago. We had little problem in hammering out a business-to-business deal. Previous experience that we gained in Motihari-Amlekhgunj project helped us do things easily. We raised the same old precedents. We did not have to make huge arguments on any issue. We could easily discuss issues such as what should be the modality of the projects, who will do the operation, what will be the technical parts and what we N side should do in the projects, how we should cooperate when should the Indian authorities bring stuffs at the border and how can we smoothly provide construction materials. We also helped coordinate with local bodies.